Fix The Biggest Problems In Your Business | Mike Michalowicz | Modern Wisdom Podcast 165

1. 0:00 – 4:59

   Why business feels like constant firefighting (and why clarity is the real bottleneck)

   1. MMMike Michalowicz0:00

      Well, I sent out a survey about five years ago when I was first contemplating this book, and I said, "I wanna know what your biggest challenge is." And hundreds and hundreds of responses came back, and some people responded multiple times with different challenges. It became very clear very quickly that the biggest challenge business owners and entrepreneurs have is knowing, like, what their biggest challenge is. So the biggest challenge is simply knowing what the biggest challenge is. There's a lack of clarity. Everyone was rushing to the apparent. So that became the thesis of the book, to resolve that.

   2. CWChris Williamson0:33

      (wind blowing) Michael Michalowicz in the building. How are you doing, man?

   3. MMMike Michalowicz0:38

      I'm in the house. I'm doing well, mate. How are you?

   4. CWChris Williamson0:40

      Yeah, very good. Thank you. Nice use of mate as well, I like that.

   5. MMMike Michalowicz0:43

      (laughs)

   6. CWChris Williamson0:43

      It's like we've completely Anglicized everything, haven't we?

   7. MMMike Michalowicz0:46

      (laughs)

   8. CWChris Williamson0:46

      Yeah, it's good, it's good, man. So I, I... we're talking about business today, we're talking about how businesses can upgrade and up-level themselves. You know, we've got a period of entrepreneurial turmoil at the moment.

   9. MMMike Michalowicz0:57

      My gosh, yeah.

   10. CWChris Williamson0:58

       Big challenge. Um, let's forget the current situation that we're in. Why can operating a business be so difficult? Because you've got your product or your service-

   11. MMMike Michalowicz1:09

       Yeah.

   12. CWChris Williamson1:09

       ... and there's customers who need it-

   13. MMMike Michalowicz1:11

       Yeah.

   14. CWChris Williamson1:11

       ... so why, why does chaos ensue? Why is not just plain sailing?

   15. MMMike Michalowicz1:15

       Yeah, 'cause there's a million moving pieces. And I don't know if that's the exact number, but there's so many different elements that we need to do, so it's, it's a prioritization problem when, when everything comes at you equally. I, I think of many people come to work with a vision or plan for their work, I do, and yet you open email and there's this incessant, unstoppable chain of questions and direction and demand along with your vendors and clients. So it's, it's about being pulled in all these different directions. We don't prioritize, we don't know how to prioritize what we need to do, and, uh, and therefore we try to do everything with equal urgency. So I... you know, most business owners, it's just this circuitous circle of not making progress, but there's also this relentless need to do something, anything.

   16. CWChris Williamson1:59

       (laughs)

   17. MMMike Michalowicz2:00

       You know?

   18. CWChris Williamson2:00

       Yeah. (laughs) Are you, um... you use a term in your book about putting out fires-

   19. MMMike Michalowicz2:07

       Yeah.

   20. CWChris Williamson2:07

       ... and that, it's, it's funny that you say that, 'cause that's what me and my business partner constantly feel like we're doing, is just-

   21. MMMike Michalowicz2:13

       Yeah.

   22. CWChris Williamson2:13

       ... like what... you know that game of whack-a-mole?

   23. MMMike Michalowicz2:15

       Yeah, yeah. Oh, that's exactly what this is. You, you can never win, right? But, but the funny thing is, in whack-a-mole, you get points every time you hit the mole.

   24. CWChris Williamson2:22

       (laughs) Yeah, no... yeah, I get it.

   25. MMMike Michalowicz2:24

       And so in our business, you know, every time we accomplish something, we give ourselves that conscious or subconscious pat on the back, and say, "Ah, another thing down. Super hero swept in, saved the day yet again."

   26. CWChris Williamson2:35

       Yeah.

   27. MMMike Michalowicz2:35

       But then the next mole presents itself, and you're whacked in again. So this is actually human biology. We put extraordinary significance in recent emotion and wins, so completing something feels good, but we don't... we're not good at considering the long-term consequence. So we get this little endorphin release, "Completed a task, got that done," but we're not considering how that task will serve us in the long term, so it just becomes this perpetual series of just whacking things down.

   28. CWChris Williamson3:03

       I mean, perfect example of this is people that will be working from home at the moment for the first-ever time. I've had a lot of messages from people saying, "F- mate, I have no idea how you do this on a daily basis." They're used to working in an office-

   29. MMMike Michalowicz3:17

       Yeah.

   30. CWChris Williamson3:17

       ... perhaps with more structure-
2. 4:59 – 6:37

   Contemplation vs. reaction: the discipline that makes prioritization possible

   1. CWChris Williamson4:59

      That was a, a hammer blow that I needed, uh, reapplying to me when I read Fix This Next, your book, um, and that, that point, there can only be one highest priority.

   2. MMMike Michalowicz5:13

      Yeah.

   3. CWChris Williamson5:13

      There can only be one most important thing, by definition.

   4. MMMike Michalowicz5:16

      Right, by definition. And you know, these... you always hear these companies saying, "Here's our top ten priorities for this year." It's like, that's bullshit. Y- you can't have ten. (laughs) What's the number one priority? Well, they're all important. Uh-huh. And, uh, and that, that causes the trap. And if we bring this down to more of a, a micro level, um, on a daily basis or by an hourly basis for an individual, uh, business owner or employee, um, everything's a priority. Same thing, like, all those little micro-tasks are priorities, and, uh, th- this is not mathematically possible. But what it allows us is to escape contemplation. What I believe, between every action and reaction, uh, there needs to be contemplation. What, what we default to, though, is in comes that request, action, I'm gonna react and, you know, take an action around it, delete it or respond to it or, or complete the task. But contemplation is where we start prioritizing, the true nature of prioritizing, what's important and needs, uh, uh, our attention, what's important and can be deferred, what's unimportant and should be avoided, and, and then we can start-... you know, differentiating things out. But we don't give ourselves time for that contemplation. That's the problem.

   5. CWChris Williamson6:23

      I suppose as well, you can have too much time for contemplation, which is where that paradox of choice-

   6. MMMike Michalowicz6:28

      Good point.

   7. CWChris Williamson6:28

      ... comes in, right? And you end up s-

   8. MMMike Michalowicz6:29

      Yeah.

   9. CWChris Williamson6:29

      ... just wallowing around in your to-do list with ... you're just sw- drowning in papers and you have no idea what's going on. So, (clears throat) let's get into it.

3. 6:37 – 8:38

   The 'Survival Trap': escaping today’s crisis by creating tomorrow’s crisis

   1. MMMike Michalowicz6:37

      Yes.

   2. CWChris Williamson6:37

      W- what is the problem that the Fix This Next analysis is solving?

   3. MMMike Michalowicz6:43

      Yeah, so fix, uh, he- the core problem, I call it the survival trap. And-

   4. CWChris Williamson6:47

      Yeah.

   5. MMMike Michalowicz6:47

      ... how you can imagine this is if you take on, uh, a piece of paper, you write the letter A on a large piece of paper, right in the center, put a circle around it-

   6. CWChris Williamson6:54

      Mm-hmm.

   7. MMMike Michalowicz6:54

      ... that's representative of where we are right now, point A, right? It's, it's the either crisis or maybe there's opportunity, but it's whatever we are considering in the moment. And in many businesses, particularly right now, it's c- it's crisis-oriented. There's, there's demand on us. Well, any action, any direction we go away from point A will give us relief. So say the crisis is we need more sales. Well, if I draw an arrow from point A up saying ... and that represents hiring, uh, a rainmaker employee. Well, I could also draw an arrow to the right that says we're gonna cut prices by half. I could draw an arrow to the left saying that we can offer a, um, pre-pay coupon. You know, buy f- four products today and give us money, and you w- you'll get it in the future or whatever. You can keep drawing these arrows, and any direction you go will get you out of point A, giving you relief. That's ... but there's a problem here. If the business needs you going to point B, and you can draw this out on that piece of paper. In the bottom left corner of that paper, draw the letter B and put a circle around it, that's where the business needs you to go. You'll see that many of the decisions we made in this little example, the arrows weren't pointing in that direction. And in fact, in some cases, the arrow goes in the polar opposite direction, taking us further away from where the business needs to go. Well, I call this the survival trap, this, this urgent need to get out of crisis, but taking us yet to a new crisis. So what we need is a tool, uh, and, and this is what I share in Fix This Next, a specific strategy to know where point B is. It's not about doing, uh, th- the right thing. It's doing the right thing at the right time. Uh, you know, w- sometimes we're doing the right thing, we're doing it at the wrong time, and it's like, "Why isn't this working?" Other times, we're doing the wrong thing at the right time and it doesn't work. It's, it's the combination of the two. We need to do the right thing at the right time, so we need clarity on where the hell we need to go in the first (laughs) place.

4. 8:38 – 9:38

   The biggest challenge is knowing your biggest challenge

   1. CWChris Williamson8:38

      Yeah. Can you tell us that, th- the biggest problem, quote? Can you give us that? 'Cause I absolutely love that.

   2. MMMike Michalowicz8:43

      Oh, yeah. Right. Th- th- and this is the thesis of the book. Uh, f- fr- I'll tell you how it came about, the conception. I, I have a, a sizeable readership that I'm very blessed to have and, and in regular contact. Well, I sent out a survey about five years ago when I was first contemplating this book, and I said, "I wanna know what your biggest challenge is." And hundreds and hundreds of responses came back, and some people responded multiple times with different challenges. It became very clear very quickly that the biggest challenge business owners and entrepreneurs have is knowing what their biggest challenge is. So the biggest challenge is simply knowing what the biggest challenge is. There's a lack of clarity. Everyone was rushing to the apparent, so that became the thesis of the book, to resolve that.

   3. CWChris Williamson9:22

      I love it, man. I, if you can teach me and my business partner to work out what our biggest problem is, I will be ... you, you will have done more than we've done in 13, 13 years of business because you're right. It, in fact-

   4. MMMike Michalowicz9:34

      Okay. Well, that's my goal then. We'll do it in the next 40 minutes.

   5. CWChris Williamson9:35

      Let's see if we can do it today. We got 40 minutes to go.

   6. MMMike Michalowicz9:37

      Yeah.

5. 9:38 – 12:01

   Business Hierarchy of Needs: why ‘gut feel’ fails and data must lead

   1. CWChris Williamson9:38

      Um, okay. So let's talk about the business hierarchy of needs. I recently had, um, uh, Scott Barry Kaufman on, the guy that hosts the psychology podcast, big time lover of Abraham Maslow.

   2. MMMike Michalowicz9:50

      Yes.

   3. CWChris Williamson9:51

      So we've recently, recently gone through Maslow's hierarchy of needs.

   4. MMMike Michalowicz9:54

      Perfect.

   5. CWChris Williamson9:55

      Uh, s- but today we're talking business hierarchy of needs. What are they?

   6. MMMike Michalowicz9:59

      Yeah. And, and they're, they're very similar with one extraordinarily s- important and significant differentiation. So back to Maslow's, then you're very familiar with the base is physiological all the way up to self-actualization. What Maslow was arguing and what's important as it translates over to the business hierarchy of needs is that if a base level need is not being satisfied, that becomes a primary need. The example I use is the base level is physiological: breathing air, drinking water. The next level above that is safety needs like seeking shelter from the elements or clothing or protection from harm. Well, if, if I'm outside, I, I live outside New York City, and some of these winters we get here are, you know, sub-zero. Um, s- talking Fahrenheit, we saw sub 30s, minus 30 Celsius, you know, freezing temperatures. If I'm outside in a T-shirt and these temperatures are coming in, I will biologically respond by seeking shelter and clothing immediately, 'cause otherwise I will die from hypothermia. Conversely, um, if while I'm out there, all of a sudden someone puts a plastic bag over my head and wraps duct tape around my neck, I am now suffocating. My primary need has shifted to even a more base level need, physiological. I need air. I will tear at that bag to rip it open because I'm dying for air. The h- the freezing doesn't matter until I get that bag open, then I'm running for shelter. So Maslow says if a base level need's not being satisfied, we revert to it. Well, our business has a similar structure, but there's one significant difference, and I'll explain the structure for business. The significant difference is this, we are not biologically wired into our business, you know, we are biologically wired into ourselves. Therefore, if you're walking down a dark alley in Newcastle (laughs) and you all of a sudden get the creeps that someone's gonna attack you-

   7. CWChris Williamson11:42

      All the time.

   8. MMMike Michalowicz11:42

      ... you should turn ar- yeah, turn around and walk away. An- and the reason is, is your, your senses, sight, smell, hearing, are triggering that emotion. In our business, we're not neurologically wired, yet business owners consistently say, "Chris, oh, I trust my gut. I need more sales. I can feel it. I need it." No, you can't feel it.

   9. CWChris Williamson12:01

      (laughs)

6. 12:01 – 24:34

   Level 1–2: Sales and Profit—why revenue vanity can kill a company

   1. MMMike Michalowicz12:01

      It's impossible to feel it bec- because you're not neurologically wired in. It's maybe a beacon, a call to action, maybe there's an instinct that's triggering, but we actually need the empirical data. Here's, here's the business hierarchy of needs, and, and you and your partner can start using this in your business right now. The base level needs for all organizations are sales. That is the creation of oxygen for a business. We need inbound cash flow, but immediately above that is profit. Profit is the creation of stability for an organization. Now, these two are already interrelated and all the levels are. The foundation must be...... strong enough to support the level above it, but it just needs to be adequate. For example, I need sales, and I ask myself in my business, "Am I creating sales, any sales?" And if the answer is yes, I then ask simply the next question, "Am I creating enough sales to support a degree of profitability? Are my sales adequate?" And this is where businesses already get messed up. Many businesses owners don't consider the stability of the organization. They simply say, "Sales cures everything."

   2. CWChris Williamson12:59

      (laughs)

   3. MMMike Michalowicz12:59

      "We need to sell our way out of it," which is the biggest bunch of, of lies ever. Sales do not cure everything. Sales actually translates to organizational strech- stress. The more sales I have, the more responsibility placed on my organization. And if I'm a small company and I, and I run the business, that's more stress on me. So sales is important to the degree that it supports profitability.

   4. CWChris Williamson13:22

      Mm-hmm.

   5. MMMike Michalowicz13:23

      Profitability is stability. And, um, sadly right now with this crisis going on with COVID and stuff, I see business after business here in where I live, uh, outside New York City collapsing because all they cared about was sales. They don't have any runway of cash, no protection, no stability. And within weeks, some of them in days of the crisis, are out of business for life.

   6. CWChris Williamson13:44

      Well, I mean, that, I think-

   7. MMMike Michalowicz13:45

      (sighs)

   8. CWChris Williamson13:45

      ... that reflects, um, business owners and generally people's personal, um, proclivities with the way that they set their own finances up, right?

   9. MMMike Michalowicz13:54

      That's right. Oh, yeah.

   10. CWChris Williamson13:54

       There's that statistic, that statistic that (clears throat) I think 80% of Americans don't have more than one month of, uh, cash set aside, you know-

   11. MMMike Michalowicz14:03

       Sure.

   12. CWChris Williamson14:03

       ... like, that month, that month's gone. That month's been and gone.

   13. MMMike Michalowicz14:05

       It's true. A month's gone and we're done.

   14. CWChris Williamson14:06

       And-

   15. MMMike Michalowicz14:06

       It's abysmal. It's, it's absolutely abysmal. People are fu-

   16. CWChris Williamson14:08

       When you then r- you ratchet that up to the business level-

   17. MMMike Michalowicz14:11

       Yeah.

   18. CWChris Williamson14:11

       ... and you're like, "That's, we had five working days of capital."

   19. MMMike Michalowicz14:16

       Yeah.

   20. CWChris Williamson14:16

       "That's how much liquidity we were playing with."

   21. MMMike Michalowicz14:18

       Yeah. It's, so, so what happens is desperation kicks in. Now we start doing desperate moves to save the business, big sales, big discounts, anything to save the business, which if it staves the immediate moment, if it saves you, you're simply at point A and you drew an arrow out, the crisis will be worse because now how are you going to recover from this? You're making less, less make, you're making less profit. You've been, even undermined the company more. So people focus on how much they make, not how much they take, and those are radically different. Level two in the business hierarchy of needs, how much is your business taking? That is the stability of the organization. But once we achieve that, we simply ask ourselves, "Do we have a degree of stability? Do we have enough stability to support the next level in the business hierarchy of needs, which is order?" Order is the creation of efficiency. Efficiency gives the business strength because organizational efficiency reduces the dependency on any individual, that if the business owner gets sick, and that used to be an analogy, now it's very real, you can get sick (laughs) , and are taken out of the business for weeks or months, can the business continue to deliver on its values and promises to its clients? And this isn't true just for the boss, it's true for anyone in the organization. Um, can, can the... And, and the busi- and there's other opportunities in efficiency that as a business delivers on efficiency, it can bring more value and more margin to a business, benefiting profit. So these all work interrelated. The, the remaining two levels in the business hierarchy of needs are impact, impact is the creation of transformation. This is where your, your business is beyond the transaction of the service or products it provides, it's about transforming the lives of p- the people it touches. And then the highest level of business is called legacy, which is the creation of permanence. This is, when, when a business achieves permanence, what I found is that's when the business owner realizes they were never business owners. They were stewards of this organization. It's its own entity and it's meant to live on without them, beyond them. So these are the five levels. And w- the, the final thought I want to share about the business hierarchy of needs is this is not a ladder. It's not about climbing to the top and waving to your friends from the top. What it is, is a, is a pattern of needs that need to be addressed, and we simply ask our questions, "Is the base adequate to support the level above it? Is that level adequate to support the level above that?" And if not, we have to revert to the base. Like, like building a building, a structure of five stories, you don't start on the fourth story and say, "Let's put a building up here," and it falls into thin air and collapses. And at the same time, you don't build this massive basement foundation and put a little tool shed on top of it-

   22. CWChris Williamson16:48

       (laughs)

   23. MMMike Michalowicz16:48

       ... because it would fall in. They have to work relationally.

   24. CWChris Williamson16:52

       What are some of the common mistakes that you see business owners making which go against the fix this next analysis or, or the, the business hierarchy of needs? How do people get this as wrong as they can get?

   25. MMMike Michalowicz17:07

       Yeah. The, well, I'll give you the two most common because they come right to mind. The first most common, particularly in startup businesses, is they focus at the impact or legacy level. They, they go into business saying, "We want to change the world. I will do everything to be the, you know, the business that just changes everything." And then they don't think or consider the foundation (laughs) of sales. They don't master profit or efficiency, they just go, "We're changing the world." And very quickly, the business has no structural r- rigidity below it, and the business collapses on itself. There's these great ideas and concepts that just deflate upon themselves. So that's the most common problem. The second one is sales cures all. It is a horrible belief. They just build this foundation and foundation of sales. True story, I have a friend who, uh, a dear friend who had a company that did $250 million U.S. in annual revenue.

   26. CWChris Williamson18:01

       Wow.

   27. MMMike Michalowicz18:02

       And, yeah, exactly. And that's when people say, "Whoa, that's a big business." Um, and sadly, it collapsed within two weeks, not of the COVID virus, of a bad strategic decision they made six months ago, and the entire business collapsed (snaps fingers) like that-

   28. CWChris Williamson18:16

       Wow.

   29. MMMike Michalowicz18:16

       ... because they made a bad strategic decision. They didn't consider the next level of profit. They didn't bring stabili- financial stability to the organization. So it's a shame, but m- many business owners think that sales cures all, and our ego's tied to it. That's the kind of a third component. It's like, it's all about the Entrepajoneses. You know, "I got to keep up with you. You're doing a million? I got to do two million. You're doing two? I got to do five." It's this constant back and forth of the vanity metric of sales and revenue without the consideration of sanity of cash profits.

   30. CWChris Williamson18:49

       Man, top line is bullshit.... top line is-
7. 24:34 – 33:05

   How to improve profitability: cut fat, then grow margin (pricing courage)

   1. CWChris Williamson24:34

      move from sales to profit? I mean, there's only really two figures, right? There's how much are you taking and how much are you spending?

   2. MMMike Michalowicz24:41

      Exactly. Exactly. So profit is, um, is, is driven by exactly that thing, cost control, margin. Uh, margin is the spread between what you sell something for and what you collect for, right? So we can always increase or we should seek ways to increase margin and reduce cost. The interesting thing is cost can only be reduced by so much. Uh, there's a certain point you can't cut costs anymore because either you're cutting the muscle of your company, meaning you can't produce, or you've hit zero, and you can't go below zero. Margin can always increase. So what I do with a lot of businesses is, if they have some degree of sales, they have the, the base-... business hierarchy achieved, we then say, "Well, what are the necessary costs for that sales?" And we can cut, in many businesses, 10, even 15 or 20%, like, like that, unnecessary subscriptions and so forth. You can cut a certain amount of fat out of the business, but at a certain point you start cutting muscle and you gotta stop there. Then we look at the margin, and that's where the big opportunity is. And, and your, your example at the door, one pound versus two pounds, like, that's, you doubled your margin.

   3. CWChris Williamson25:44

      (laughs)

   4. MMMike Michalowicz25:44

      That is a h-... that's 100% growth. That's unbelievable. And no one flinched.

   5. CWChris Williamson25:49

      Yeah.

   6. MMMike Michalowicz25:49

      That's the big opportunity. And, and wha-... as I went through the business hierarchy of needs in Fix This Next, I was interviewing companies, I found that the biggest resistance about increasing margin is actually not from the clients themselves, it's from the business owner thinking that they can't do it in the first place.

   7. CWChris Williamson26:03

      Oh, man, you are, you are striking at the heart of entrepreneurs across the world at the moment. Like, especially if you're a u- a small business owner, you feel... the fear that you have, the level of anxiety that you have when you think about putting the price up, is, i- i- i- unbelievable. I remember the fun-

   8. MMMike Michalowicz26:21

      It's unbelievable.

   9. CWChris Williamson26:22

      ... the first time that we started, it was just a long time ago now, first time that we were gonna raise the price on the door, and I was adamant. I was like, "Right, no one's gonna come. No one's go-... (laughs) It's gone from-"

   10. MMMike Michalowicz26:30

       Yeah. (laughs) Yeah.

   11. CWChris Williamson26:30

       "... 2 pounds 50 to 3 pounds 50 before 11 o'clock." And I'm like, "It's a Saturday." Looking back now, I'm like, "It should have been six pounds." It should have been-

   12. MMMike Michalowicz26:37

       Yeah, yeah, yeah.

   13. CWChris Williamson26:37

       It should have been two times, it should have been three times that. But at the time, you're just terrified. Completely-

   14. MMMike Michalowicz26:42

       Of course.

   15. CWChris Williamson26:43

       ... completely terrified. No one's gonna come. Everyone's gonna think it's shit. It's never worth anything.

   16. MMMike Michalowicz26:48

       You know, and the, and the funny thing is, th- 'cause I had this exact feeling. We go through all of the worst case scenarios. We're gonna lose clients and so forth. Here's the truth. If those people didn't come and when you're charging 3 pounds 50, when, when you're charging that and clients don't come, that means they don't value that venue as much as you th- you want them to. If, if, if you're gonna say, "You know what? An extra pound? No way, this is not for me," those are cheap clients. Do you really want those clients in the first place? And that's what we gotta consider. I- if people are not gonna buy something at a higher price point, do they really value what we're offering?

   17. CWChris Williamson27:19

       Oh.

   18. MMMike Michalowicz27:19

       And that also means that then the onus is on us to share the value, to show the benefits of paying the additional money. And that's the, the challenge that many businesses have, is actually just enunciating what value they deliver. Often they just increase price, uh, and they're, they're afraid of increasing price 'cause people will leave, but they don't even consider, "If I do increase price, I need to tell them the value that they're really getting," that's inherently there in many cases, they just need to make it public. And, uh, and then, you know, when you do it, you're often surprised like, "Oh my gosh, no one, no one blinked an eye. I should have done this years ago. I'm a fool." (laughs)

   19. CWChris Williamson27:52

       Well, in other businesses that aren't as, um, easy to acquire customers, like I say, it's the same cost, there's no variable cost, there's essentially no extra work for us to do 1,000 people versus-

   20. MMMike Michalowicz28:04

       Yeah.

   21. CWChris Williamson28:04

       ... 500 people. DJ's gotta be there, door staff and us and blah, blah, blah. It's the same, it's essentially the same event.

   22. MMMike Michalowicz28:10

       Yeah.

   23. CWChris Williamson28:10

       But a lot of other businesses aren't, and-

   24. MMMike Michalowicz28:13

       Yeah.

   25. CWChris Williamson28:13

       ... the interesting relationship, I think you touched on it at the very beginning where you said that, um, increasing sales actually increases headaches-

   26. MMMike Michalowicz28:20

       Yes.

   27. CWChris Williamson28:20

       ... a lot of the time. And if you had the choice to make the same profit at half the sales that you're doing at the moment-

   28. MMMike Michalowicz28:27

       Oh my God, it's heaven.

   29. CWChris Williamson28:28

       ... you know? Like, there's a stage where you get to where you're like, "Well, I essentially could have the entire business running off the back of one client." Which is why-

   30. MMMike Michalowicz28:35

       Yep.
8. 33:05 – 35:41

   Level 3: Order—building efficiency and reducing owner dependence

   1. CWChris Williamson33:05

      I love that. So let's move, let's move from profit to order.

   2. MMMike Michalowicz33:08

      Yeah. Yeah.

   3. CWChris Williamson33:08

      How are we, how are we, how are we moving from profit to order?

   4. MMMike Michalowicz33:11

      Yeah. So the, the question is, do we have enough stability in the organization to bring about organizational efficiency? Some businesses try to get more and more efficient. How do we get more done with less effort without considering the demand it puts on resources to do that? As you bring more efficiency to a business, it takes more effort to achieve it. Uh, one, one example, too, is in scalability. The, the bigger you get, efficiency works to your advantage. There was a manufacturer I interviewed in Pennsylvania. They make play sets. They were the, at the time, before they sold their company, they were the biggest play set manufacturer. They're now part of a conglomerate. And they had this massive, massive machine, and, uh, this machine would paint the play sets. Well, what was interesting was the setup for a machine to get ready to start running a run could take about three to four hours of effort, maybe even more time. So when, when you spend three or four hours doing it, if one play set goes through and it gets painted in five seconds, it didn't get painted in five seconds, it got painted in four hours and five seconds. Well, when the second one went through, it didn't get painted in five seconds, it got painted in two hours and five seconds, right? Because that setup time has been split in half. As more would go through it, the setup time became less and less important. So once you really get the steam rolling and they were sending thousands of set of, uh, play sets through, they are making money, big time. Well, that's why efficiency is so important at this level. We first need to have some kind of sales, consistent sales in there, profitability, sustainability, and that needs to be at a level of significant enough that we start focusing on efficiencies because it brings value back to the organization. That's how it works. And as you get more efficient, it may trigger you to say, "Now we can support more sales. Let's go back to the sales level." So instead of climbing a ladder here, we start cycling back down. We build the base of sales stronger, allows more profitability, allows more efficiency, and we cycle back down and we'll start ping-ponging around, uh, as the business grows. Kind of like a, like a volcano. Uh, a mountain is formed by a volcano flowing down more lava and then yet again and again and the mountain gets bigger.

   5. CWChris Williamson35:10

      Yeah, I get it. The... So order, your middle section of the-

   6. MMMike Michalowicz35:15

      Yes.

   7. CWChris Williamson35:15

      ... of the pyramid, I think this is where me and my business partners spend a lot of our time.

   8. MMMike Michalowicz35:19

      Yeah.

   9. CWChris Williamson35:19

      We're very, um, process-oriented. We like to have... There's a document written for everything. Anything that's ever happened that we think might happen again, there's a process written for it. And I think you touched on that about the, um, the owner or the CEO or the MD or the partner or whatever being ill or being unavailable-

   10. MMMike Michalowicz35:37

       Yes.

   11. CWChris Williamson35:37

       ... for a period of time and the business being able to continue without them.

9. 35:41 – 39:35

   The four-week vacation test: can the business run without you?

   1. MMMike Michalowicz35:41

      Yeah. I, uh, I call it the four-week vacation. And, uh, sometimes four-week vacations are not planned. That's when you just-

   2. CWChris Williamson35:45

      We're all on one at the moment.

   3. MMMike Michalowicz35:47

      Yeah. Are you?

   4. CWChris Williamson35:47

      We're all on one at the moment. Yeah. Well, well, I mean-

   5. MMMike Michalowicz35:49

      Well-

   6. CWChris Williamson35:49

      ... it's a corona vacation, isn't it? Yeah.

   7. MMMike Michalowicz35:51

      Yeah, yeah. Oh, yeah. We're... Yeah. Touche. We're all on that. But it was funny. I, you know, I speak a lot in the US, occasionally in Europe. And, uh, in the US, no one takes vacation. You know, you're, you're actually, uh, considered weak if you don't work through vacations that you do take. And it's a horrible mentality because the problem is a business becomes, uh... Is being carried on the back by the business owner and if they are taking, have a coronavirus or something, the entire business stops because the business owner has failed and it can go under. So the four-week vacation, the idea is if someone can leave a business for four consecutive weeks and the business continues to flourish with them fully disconnected, physically and digitally, there's a business that's no longer dependent on the owner. It can grow on its own. Well, when I, I toured through Europe, I was in Germany recently, I'm like, "You gotta take this four-week vacation." You know, people laughed at me. They said, "Welcome to August." Uh-

   8. CWChris Williamson36:39

      (laughs) Yeah, man.

   9. MMMike Michalowicz36:41

      ... Europe shuts down.

   10. CWChris Williamson36:42

       Yeah.

   11. MMMike Michalowicz36:42

       And it's like, oh my god, this is predominantly an American phenomenon, but sadly, it's, it's seeking... It's kind of seeping out all over the world that we need to be workaholics and that's wrong. We, we actually need to prove that we can remove ourselves from the business because it will happen. Maybe it's not a vacation, maybe it's an illness or you get hurt, but it will happen and we need to remove that dependency of, of being on an owner.

   12. CWChris Williamson37:05

       Anyone that's listening who runs a business or even is just in a business where you get to know who the CEO is, just take a second and think what would happen if the boss left for four weeks now? And especially if you're a business owner, that visceral, that fear that you're, you've got that's rising in your chest that makes you want to throw up onto your AirPods, um, that's, that is, that's how I, we felt for a very, very long time. And especially in this world now where increasingly you've got-... lots of small businesses, you know. I wouldn't like to guess what the average number of employees is in a business in the UK, but I'd guess maybe something like 20, probably, you know, like your 20 or 50, something like that, like a typical, typical s- size company.

   13. MMMike Michalowicz37:50

       Mm-hmm.

   14. CWChris Williamson37:50

       And that means that the owner's moved up through the ranks. They know the office, they b- they, the landlord that owns the thingy, they go out for beers with the guy that owns the office block, they... You know, everything, every little bit, and you've got your claws into all of these different sections of it.

   15. MMMike Michalowicz38:04

       Yeah.

   16. CWChris Williamson38:04

       And every one of those claws needs unpicking, one by one by one-

   17. MMMike Michalowicz38:08

       (laughs) Yeah, yeah.

   18. CWChris Williamson38:09

       ... all the way along, to allow you to relinquish that control. It's very emotionally... For something that's supposed to be sales, profit, order, efficiency-

   19. MMMike Michalowicz38:19

       Yeah.

   20. CWChris Williamson38:19

       ... it's actually, you're getting to the point now where you're like, it's an emotional interaction-

   21. MMMike Michalowicz38:24

       Yes.

   22. CWChris Williamson38:24

       ... you need to let go of.

   23. MMMike Michalowicz38:25

       And I loved your example, because it is talons in the business, and the removal is not like you just release it. Sadly, actually though, that is the perception of many business owners, that one day there will be a switch flipped somehow magically, that all of a sudden the business runs itself, you're like, "I'm retiring, I'm selling this and I'm gonna make tons of money." But the reality is, this is a throttle. We have to slowly and specifically and deliberately extract those claws one step at a time from the business, and, um, it can take sometimes months or in many businesses years to extract the owner fully. I've implemented it in my own business and I've now reinserted myself, and what I mean by this is I was running the operations, I was involved in every little task. While I started to remove myself, I've now brought on a president that runs the company. Her name's Kelsey, she runs the organization, and now that the business can run on the day-to-day completely without me, it's freed me up to do what gives me the most passion, which is be the spokesperson. I love talking shop, like what we're doing n- now, Chris, I love this, and I love writing books. So now I can do the things I'm passionate about, but if I get sick or I leave the business, yes, the spokesperson role's not filled, but the core essence of the business will continue on.

10. 39:35 – 42:32

    Role-based teams over titles: matching strengths and cross-training

    1. CWChris Williamson39:35

       Here's a perfect way for people to frame this as well. If you're a business owner that's listening and you've never relinquished that control, but as you've just explained there, Michael, you, you were able to bring someone on who was able to do the things that you were capable of doing, think about that as a business owner. If you were able to bring someone on and write them a document that was howtobemichael.docx.

    2. MMMike Michalowicz39:57

       (laughs)

    3. CWChris Williamson39:58

       Like, and just write them a big thing, "This is what, this is how you do me." It's like, if-

    4. MMMike Michalowicz40:02

       Yeah.

    5. CWChris Williamson40:02

       ... if someone can do the job that you are doing now off the back of a document that explains how to do it, where is your unique talent being placed within this business? You're just a, y- you're just a guy, you're just a bleep, bleep, bleep, bleep, input, output.

    6. MMMike Michalowicz40:18

       Yeah.

    7. CWChris Williamson40:19

       Like, that's it, that's it. There's no longer your, um, unique creative vision that's being deployed to the business, you're just computer program.

    8. MMMike Michalowicz40:27

       That's right. Yeah, we're avoiding playing into our strengths. And, uh, the funny thing is Kelsey doesn't replace me, Kelsey's, like, 10 times better than me. She understands, uh, y- you know, her super strength is in human connection. She... My colleagues here have an adoration for her that supersedes the adoration or...

    9. CWChris Williamson40:47

       (laughs)

    10. MMMike Michalowicz40:47

        ... that they had for me.

    11. CWChris Williamson40:48

        (laughs)

    12. MMMike Michalowicz40:49

        And it's, it's almost painful to say that, but it's realistic. And I love, I love my colleagues, I will do anything for them, and I feel they, the same way about me. But Kelsey, Kelsey has that something special. They will take a bullet for her, they will protect and defend her, because she protects and defends them. So not only did she replace me, she's amplified the strength of our organization. Uh, it's funny, a- as I was writing Fix This Next, I was looking at organizational charts, and most org charts are pyramid structures. Up top it says... Doesn't even say president, it says the word me, and there's a long arrow-

    13. CWChris Williamson41:18

        (laughs)

    14. MMMike Michalowicz41:19

        ... you know, a long, long line going down to the minions down below, that's the vice president of sales and all these different things. Well, those structures are, are a, a structure that plays into titles, not into strengths. A better organizational structure is, is, is matching someone's tasks or talents to the task they have at hand, a web-like structure. We, we actually don't have t- no one has titles here. I don't... I, I, I act as a spokesperson, I, I write books, but I don't have a title. Kelsey actually is the only one with a title, she's the president, um, because we need that for certain discussions and stuff and, and everyone needs to know that, you know, if you have-

    15. CWChris Williamson41:56

        Big boss.

    16. MMMike Michalowicz41:56

        ... it's more a small business. But no one else has a title, they just serve roles. And what that's allowed is us to be very dynamic in our capacity. When, when we have a massive order for, say, books that w- we're shipping, usually our distributor does it but if we have to do it, we have three people that can shift over to that no problem. If we have a large amount of customer service calls, we have one person that caters to that, but we have th- two other people cross-trained in that, we can shift resources there. So by doing role specialization and matching to people's talents and removing titles, it allows this almost organic shifting of the business, a- and people don't feel compelled to stick within their role of a title.

11. 42:32 – 46:27

    Level 4–5: Impact and Legacy—when business shifts from getting to giving

    1. CWChris Williamson42:32

       Yeah, I love it. So we've got two left, impact and legacy. Let's talk briefly about impact.

    2. MMMike Michalowicz42:37

       Yeah. So what... There's a fascinating transition that happens at this level. The first three levels we talked about is about getting, we need to get sales, get profit, get efficiency in our organization. Impact, we flip the about contribution now of giving. Impact is where we are serving our client beyond the transaction. It's life-changing for them. And when I say life-changing, I don't mean like you've saved someone's life, but there's a shift in their life, so there's some kind of meaning beyond the commodity and they put significance in you. Th- the example I like to use is Harley-Davidson. Anyone can sell a motorcycle. You buy a Harley-Davidson, you now belong to the Harley-Davidson community, or a weekend warrior, or a tough guy, or whatever (laughs) the title is, but you belong to a family. Now, you don't have to transform people by making them belong to a community, there's countless ways to do it, but we want our clients saying, "Wow, this is something greater in my life than I ever expected," and they see that value. That's transformation. And I will tell you this, you don't have to do it. I don't think Walmart transforms people's lives, um-... at least not here in the US. They actually probably deplete people's lives, quite frankly. But, but they do deliver on the three levels very well. They're, they're, they offer sales, they offer a value of cheapness, uh, they, they, they're profitable, and they're, they're efficient. But I don't know if we're transforming lives. Some businesses can make this election, and this is when you start realizing, to a degree, you are a steward of something good here. You, you have a platform now of service. Um, but it's a choice to be there, and I don't think it's better or worse, it's just a choice. The highest level is impact. Impact is the creation of permanence, and this is where you-

    3. CWChris Williamson44:10

       Legacy.

    4. MMMike Michalowicz44:10

       ... set your ... What was that?

    5. CWChris Williamson44:12

       Legacy, not impact.

    6. MMMike Michalowicz44:13

       Legacy. Um, I'm sorry, legacy.

    7. CWChris Williamson44:14

       Yep.

    8. MMMike Michalowicz44:14

       Legacy is the creation of permanence, and legacy is where you set your business to live into perpetuity. It's where you real- realize even you, the founder, aren't important in this. I mean, you were significant, you served a role, but it's the business that's important, and that can continue to have its impact as a legacy into perpetuity.

    9. CWChris Williamson44:32

       This is a question, you've already touched on it there. I asked, should every business aim toward impact and/or legacy? You know-

    10. MMMike Michalowicz44:44

        Right.

    11. CWChris Williamson44:44

        ... it's gonna be, it's gonna be challenging for me as someone who gets 18 to 21-year-olds drunk for a couple-

    12. MMMike Michalowicz44:49

        (laughs)

    13. CWChris Williamson44:49

        ... of years-

    14. MMMike Michalowicz44:49

        Right.

    15. CWChris Williamson44:49

        ... while they're at university to have-

    16. MMMike Michalowicz44:51

        Right.

    17. CWChris Williamson44:51

        ... a legacy. You know?

    18. MMMike Michalowicz44:52

        Right.

    19. CWChris Williamson44:52

        And I, I, I, I appreciate that. I understand what it is. So, how, how do I know, how do I know whether I should let go? And also, you've said as well, some people kind of set their sights on the peak of the mountain and everything else falls away.

    20. MMMike Michalowicz45:04

        Yeah, yeah. So the answer is no, not everyone should do it. We should speak to what our heart calls out to do. I, I have a friend who's got a business that does 15 million US. It is efficient, it doesn't need him, he's making money, and he's like, "I'm off to the golf courses." He's like, "I'm gonna go golfing every day-

    21. CWChris Williamson45:19

        I love it.

    22. MMMike Michalowicz45:20

        ... of my life now." Yeah. And, uh, yeah, and, uh, I'm like, "That is good." And I actually would argue it's more than good, it's noble, because the company is providing for employees. It is giving, uh, great services. It's, it's supporting the economy. But I also feel one day he'll wake up and say, "Is this all there is?" And I think that's the calling. When there's that sensation, "Is this all there is?" we realize that our business, or a new business, can be a platform for expression. I, I've had, for me, that transition. I, I had businesses that made money and I, I became a millionaire, and, uh, I thought it was all about the cars and the big house and the vacation house in Hawaii. I thought that's what it was. And then I had the awakening. For me, I said, "No, no, there, there's something else going on." And, uh, that's when I decided to devote myself to having, uh, impact and legacy. Additionally, I'm absolutely responsible to master sales, profit, and order. You can't skip levels here. You can't just go out and say, "I'm gonna change the world." That's a business that'll collapse on itself. So I am very regimented in driving sales that are adequate to support profit, profit that can bring about efficiency, in order for me to have impact and legacy.

12. 46:27 – 49:28

    Fulfillment after financial success: material desires vs. meaning

    1. CWChris Williamson46:27

       Man, I love it. Uh, before we go, I know that we're tight on time, I got one final thing. Uh, uh, upon you speaking about the fact that you, um, manifested some of this material wealth, then got red-pilled either by a combination of yourself and the way that you ... the place that you were in your life, and then-

    2. MMMike Michalowicz46:42

       Yeah.

    3. CWChris Williamson46:43

       ... realized that wasn't it. Um, I was listening to Naval Ravikant on, uh, Tim Ferriss, and he gave this quote, and man, it, it just hit me straight between the eyes. And he said, "It is far easier to fulfill your material desires than it is to renounce them."

    4. MMMike Michalowicz46:59

       (laughs) Touche. Very true.

    5. CWChris Williamson47:03

       I, I wonder whether or not part of your transcendence, this fulfilling of potential, uh, uh, and the, the change of dynamic has been serviced by the fact that that box has been ticked, that Michael no longer has anything to prove on the, "Yeah, I've had the home in Hawaii. I've had the this."

    6. MMMike Michalowicz47:23

       Yeah.

    7. CWChris Williamson47:24

       I think, I think a lot of people might need to go through that fire and actually tick those boxes. Does that make sense?

    8. MMMike Michalowicz47:32

       Uh, it, it totally makes sense. Like, it's funny. So we all know or heard that it's not about the money, it's not about the acquisition of stuff. Um, but I also agree that the only way for most of us to discover that is to go through the experience.

    9. CWChris Williamson47:49

       It- it's all well and good someone telling us that, but look at the people who say it.

    10. MMMike Michalowicz47:53

        I know. As they, they fly in their private jet over you and say-

    11. CWChris Williamson47:57

        Fuck. Just fuck you, Warren Buffet. Like, stop telling me about how zen you can be and how easy-

    12. MMMike Michalowicz48:01

        Yeah.

    13. CWChris Williamson48:01

        ... and simple life is, because you no longer have to play that game.

    14. MMMike Michalowicz48:05

        Exactly.

    15. CWChris Williamson48:05

        You have already done it. So man, I, I've absolutely loved today. Fix This next, your book, will be linked in the show notes below.

    16. MMMike Michalowicz48:11

        Thanks, brother.

    17. CWChris Williamson48:11

        If people want to hassle you online, where should they go?

    18. MMMike Michalowicz48:15

        Go to mikemotorbike.com. It's actually Mike Michalowicz, but no one can spell Michalowicz. Mike Motorbike, as in the motorcycle-

    19. CWChris Williamson48:22

        (laughs)

    20. MMMike Michalowicz48:22

        ... is my nickname from high school.

    21. CWChris Williamson48:24

        Yeah.

    22. MMMike Michalowicz48:25

        S- so that'll forward to my site. My books are there, free chapters. I used to write for the Wall Street Journal, you can get that, and I have my own podcast, uh, there too.

    23. CWChris Williamson48:32

        What's the podcast called?

    24. MMMike Michalowicz48:33

        Uh, it's called Entrepreneurship Elevated.

    25. CWChris Williamson48:35

        I love it. That'll be linked as well. You know what to do if you've enjoyed this episode. Like, share, and subscribe. All of the stuff that we've gone through today will be linked below. Man, I think I really love the framework. I think it's-

    26. MMMike Michalowicz48:46

        Thank you.

    27. CWChris Williamson48:46

        ... it's great, um, and it's nice to read a book. I did five years at Newcastle Uni Business School, and um-

    28. MMMike Michalowicz48:53

        Nice.

    29. CWChris Williamson48:53

        ... I constantly read things which didn't reflect my experience in ... as a young business owner, and this is the precise opposite. I'm coming up with stories that tell you the concepts from your book, because I'm seeing-

    30. MMMike Michalowicz49:06

        I love it.

Episode duration: 49:28